By Patrick Rucker and Anna Irrera
WASHINGTON (Reuters) – The Federal Reserve wants to give input on future rules governing how technology companies move into consumer lending markets, Fed Governor Lael Brainard said on Friday.
Technology companies may reach consumers directly with loans under a new license proposed by a leading U.S. bank regulator but the Fed has concerns, Brainard said.
Policymakers will have to determine whether financial technology, or fintech, companies may tap the Fed for services that large, traditional banks enjoy.
The Office of the Comptroller of the Currency (OCC), a leading regulator for national banks, has said it is open to a new type of banking charter for technology companies.
“The OCC’s proposal raises interpretive and policy issues for the Federal Reserve regarding whether charter recipients would become Federal Reserve members or have access to Federal Reserve accounts and services,” Brainard told a conference at Northwestern University in Evanston, Illinois.
While the OCC’s proposed fintech charter has been welcomed by the fintech sector, it has sparked opposition from state regulators and smaller banks.
On Wednesday the Conference of State Banking Supervisors filed a lawsuit against the OCC, arguing that it lacks the legal authority to offer such a license.
State regulators are concerned that new charter would threaten their sovereignty and consumer protection.
Speaking at the Northwestern University event earlier on Friday, director Thomas Curry defended the license.
“At the heart of the issue is the fundamental nature of the business of banking — the business of banking is dynamic and I would urge caution to anyone who wants to define banking as a static state,” Curry said. “Such a view risks choking off growth and innovation.”
The remarks from Brainard and Curry come as regulators around the world seek to strike a balance between effectively mitigating the emerging risks posed by the adoption of new technologies in finance and ensuring new rules do not hamper innovation that could benefit consumers and the economy.
(Reporting By Patrick Rucker in Washington and Anna Irrera in New York; Editing by Meredith Mazzilli)